PLAN SPONSOR AGREEMENT

1.1   Certain Definitions .

1.2   Terms Defined Elsewhere in this Agreement .  For purposes of this Agreement, the following terms have meanings set forth in the sections indicated:

1.3   Other Definitional and Interpretive Matters .  (a) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

2.1   Stock Purchase .  On the terms and subject to the conditions set forth in this Agreement and the Plan, at the Closing, Purchaser shall purchase, acquire and accept from the Company, and the Company shall issue, sell, transfer and deliver to Purchaser 1,000,000 newly issued shares of the common stock, of the Company, which upon consummation of the Plan pursuant to and in accordance with the Confirmation Order, including the cancellation pursuant to the Plan of all capital stock and rights to purchase or otherwise acquire capital stock of the Company prior to the Effective Time, shall constitute all of the issued and outstanding capital stock of the Company (such transaction, the “ Stock Purchase ”), free and clear of all Liens or other interest other than those created by Parent or Purchaser.

2.2   Consideration .

(a)   On the terms and subject to the conditions herein, on the Closing Date, Purchaser shall pay to the Company by wire transfer of immediately available funds an amount equal to $734,532,384 less (i) the Opco Escrow Amount, and (ii) the Holdco Escrow Amount (the “ Stated Price ”, as may be adjusted pursuant to Section 2.3 , the “ Purchase Price ”), to be applied in satisfaction of claims and interests as provided in the Plan.

(b)   On the terms and subject to the conditions herein, on the Closing Date, Purchaser shall pay an amount in cash equal to the Opco Escrow Amount plus the Holdco Escrow Amount to an escrow agent to be mutually agreed upon by Parent, the Company and the Plan Representative prior to the Closing Date (the “ Escrow Agent ”) by wire transfer of immediately available funds for deposit to an account designated by the Escrow Agent (the “ Escrow Account ”).  The Escrow Agent shall serve and shall hold and disburse the Opco Escrow Amount and Holdco Escrow Amount in accordance with the escrow agreement to be entered into among Purchaser, the Company, the Plan Representative and the Escrow Agent at the Closing on reasonable and customary terms consistent with this Agreement (the “ Escrow Agreement ”).

(c)   As provided in the Plan, from and after the Effective Date, the Debtors shall pay all other amounts required to be paid by them pursuant to the Plan.

2.3     Post-Closing Restructuring Expense Adjustment .

(a)   Within 60 days following the Closing Date, the Company shall deliver to Purchaser and the Plan Representative a statement of Restructuring Expenses (the “ FREA Statement ”), showing in detail the amount of Restructuring Expenses paid or incurred by the Debtors (the “ Final Restructuring Expense Amount ”), together with any documents substantiating such amounts.

(A)   In the event that that the Plan Representative disagrees with the calculation of the Final Restructuring Expense Amount, the Plan Representative may within 10 Business Days of the receipt of the FREA Statement, deliver a notice to the Company disagreeing with such calculation and setting forth the Plan Representative’s calculation of the Final Restructuring Expense Amount (the “ Disagreement Notice ”).  Any such Disagreement Notice shall specify those items or amounts as to which the Plan Representative disagrees, and the Plan Representative shall be deemed to have agreed with all other items and amounts contained in the FREA Statement and the calculation of the Final Restructuring Expense Amount.

(B)   The Company and the Plan Representative shall, during the 10 calendar days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the amount of the Final Restructuring Expense Amount.  If the parties so resolve all disputes, the computation of the Final Restructuring Expense Amount, as amended to the extent necessary to reflect the resolution of the dispute, shall be conclusive and binding on the parties.  If during such period, the Company and the Plan Representative are unable to reach an agreement, they shall promptly thereafter petition the Bankruptcy Court to review this Agreement and the disputed items or amounts for the purpose of calculating the Final Restructuring Expense Amount.  In making such calculation, the Bankruptcy Court shall consider only those items or amounts in the FREA Statement and the Company’s calculation of the Final Restructuring Expense Amount as to which the Plan Representative has disagreed.  The Bankruptcy Court’s determination of the Final Restructuring Expense Amount shall be final and binding upon the Company and the Plan Representative.

(C)   The Purchaser Entities and the Company shall, and shall cause their respective representatives to, cooperate and assist in the preparation of any Disagreement Notice and the calculation of the Final Restructuring Expense Amount and in the conduct of the review referred to in this Section 2.3 , including the making available to the extent necessary of books, records, work papers and personnel.

(b)   Promptly following the determination of the Final Restructuring Expense Amount in accordance with Section 2.3(a) , the parties shall instruct the Escrow Agent to release the Opco Escrow Amount and the Holdco Escrow Amount, respectively, in accordance with the terms of the Escrow Agreement to the Company to pay the remaining Restructuring Expenses, if any, and to distribute pursuant to the Plan.

(c)   In the event the Final Restructuring Expense Amount is less than the Restructuring Expense Target (the amount, if any, by which the Final Restructuring Expense Amount is less than the Restructuring Expense Target is referred to as the “ Surplus Amount ”), then the Purchaser Entities shall (i) pay to the Company by wire transfer of immediately available funds (within two (2) Business Days of the final determination of the Final Restructuring Expense Amount in accordance with Section 2.3(a) above) an amount equal to the Surplus Amount or (ii) use the Company’s, or its Subsidiaries’, existing cash, if available, to fund such Surplus Amount, which together with the Opco Escrow Amount and Holdco Escrow Amount pursuant to Section 2.3(b) , shall be distributed by the Company pursuant to the Plan.

3.1   Closing Date .  Subject to the satisfaction of the conditions set forth in Article VIII hereof (or the waiver thereof by the party entitled to waive that condition), the closing of the Stock Purchase (the “ Closing ”) shall take place at the offices of Weil Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, New York (or at such other place as the parties may designate in writing) at 12:01 a.m. (New York City time) on a date that is not more than five Business Days following the satisfaction or waiver of all conditions precedent to the Effective Date and the conditions set forth in Article VIII (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another time or date, or both, are agreed to in writing by the parties hereto.  The date on which the Closing shall be held is referred to in this Agreement as the “ Closing Date .”

3.2   Deliveries by the Debtors .  At the Closing, the Debtors shall deliver:

(a)   to the Purchaser Entities, the officer’s certificate(s) required to be delivered pursuant to Sections 8.1(a) and 8.1(b) ;

(b)   to the Purchaser Entities, a certificate executed by the Company that it is not a foreign person within the meaning of Section 1445(f)(3) of the Code;

(c)   to the Purchaser Entities, (i) a certificate representing the Company Capital Stock being purchased and sold hereunder, (ii) evidence of the resignations or removal of those directors and officers of the Company and its Subsidiaries, as applicable, identified in writing to the Company by Purchaser not less than five Business Days prior to Closing and (iii) evidence of any changes to the constitutive documents of the Company and its subsidiaries that may be necessary to implement acquisition of the Company Capital Stock as contemplated by the Plan and which shall have been identified by Purchaser in writing to the Company not less than five Business Days prior to Closing;

(d)   to the Purchaser Entities, an Escrow Agreement executed by the Company;

(e)   the Exit Notes to those purchasers who have entered into the note purchase agreement in connection with the Exit Facility and all other closing documents to be delivered in connection with the issuance of the Exit Notes pursuant thereto;

(f)   to the Purchaser Entities, a certificate signed by the chief financial officer of the Company and Opco required to be delivered pursuant to Section 8.1(f) ; and

(g)   to the Purchaser Entities, such other documents, instruments and certificates as the Purchaser Entities may reasonably request, including a certified copy of the Confirmation Order and notice of the Effective Date.

3.3   Deliveries by Purchaser .  At the Closing, Purchaser shall deliver:

(a)   an amount equal to the Stated Price (net of such portion of the Stated Price, if any, that (a) is reinvested in Parent in exchange for Common Stock of Parent pursuant to the Plan or (b) Purchaser and the Company agree can be funded from cash of the Company and its Subsidiaries at Closing, and which amount is not necessary for the distribution contemplated by the Plan), to be distributed as provided in the Plan by wire transfer of immediately available funds to an account specified by the Company (such account to be specified not less than two Business Days prior to the Closing Date);

(b)   an amount equal to the Opco Escrow Amount and Holdco Escrow Amount by wire transfer of immediately available funds to the Escrow Account;

(c)   to the Company, on behalf of the Debtors, an Escrow Agreement executed by Purchaser;

(d)   rights with respect to the common securities of Parent for distribution pursuant to the Plan;

(e)   to the Company, on behalf of the Debtors, the officer’s certificate required to be delivered pursuant to Sections 8.2(a) and 8.2(b) ; and

(f)   to the Company, on behalf of the Debtors, such other documents, instruments and certificates as the Company may reasonably request.

3.4   Automatic Termination .  Subject to Section 9.3 , this Agreement will expire by its own terms and terminate automatically, without notice or further action by any party, if:

(a)   the Plan is not accepted by at least two-thirds in amount and more than one-half in number of those holders of allowed claims of each of the class of Senior Note Debtholders, and the class of Holdco Debtholders that vote on the Plan in accordance with section 1126(b) and Rule 3018 of the Bankruptcy Code on or prior to the 45th day after the date hereof, provided that (i) Purchaser shall have the option to extend without limit (but subject to the other termination events described herein) by written notice to the Company, and (ii) if the Company shall have commenced solicitation on or prior to the 25th day after the date hereof and shall be diligently pursuing acceptance of each class of Secured Debtholders, Senior Note Debtholders and Holdco Debtholders in accordance with section 1126(b) and Rule 3018 of the Bankruptcy Code (A) Purchaser may not extend pursuant to clause (i) beyond the 75th day after the date hereof, and (B) the Company shall have the option to extend by written notice to Purchaser such date for additional periods of time not beyond the 75th day after the date hereof;

(b)   the Petition Date does not occur on or prior to the 45th day after the date hereof, provided that (i) Purchaser shall have the option to extend such date without limit (but subject to the other termination events described herein) by written notice to the Company, from time to time, and (ii) the Company shall have the option to extend by written notice to Purchaser such date for additional periods of time not to exceed 30 days in the aggregate;

(c)   the Plan Sponsor Order is not entered (without stay pending appeal) on or prior to the 25th day after the Petition Date, provided that Purchaser shall have the option to extend such date without limit (but subject to the other termination events described herein) by written notice to the Company, from time to time;

(d)   the Confirmation Order has not been entered by the Bankruptcy Court within 60 days after the Petition Date; provided that , either Parent or the Company shall have the option to extend by written notice to the other party, from time to time, such date for additional periods of time not to exceed 15 days in the aggregate; provided , further , that if (i) the Company shall not have obtained the approval of each class of Secured Debtholders, Senior Note Debtholders and Holdco Debtholders in accordance with section 1126(b) and Rule 3018 of the Bankruptcy Code or (ii) the condition set forth in Section 8.3(c) has not yet been satisfied due to the failure to obtain the necessary consents and approvals under applicable Laws, either Parent or the Company shall have the option to extend by written notice to the other party, from time to time, such date for additional periods of time not beyond 120 days after the Petition Date.

(e)   the Closing shall not have occurred by March 15, 2010 (the “ Termination Date ”);  

(f)   the Bankruptcy Court or any court exercising appellate jurisdiction over the Bankruptcy Court enters an order denying confirmation of the Plan  or converting the Bankruptcy Case of the Company or Opco to a case under chapter 7 of title 11 of the Bankruptcy Code and such order (i) has been in effect for 30 days and (ii) is not subject to stay;

(g)   the Restructuring Support Agreement is terminated with respect to any creditor or class of creditors pursuant to Sections 2.1(c) , 2.1(g) or 2.3 (other than, in the case of a termination pursuant to Section 2.1(g) or 2.3 , as a result of an amendment, modification or pleading consented to in writing by a Purchaser Entity or as a result of a pleading filed by a Purchaser Entity) prior to termination of this Agreement; provided that Purchaser shall have the option to delay such termination in this clause (g) without limit (but subject to the other termination events described herein) by written notice to the Company, from time to time; or

(h)   (i) the board of directors of any Debtor approves, endorses or recommends a Competing Transaction or if any Special Committee recommends a Competing Transaction and the board of directors of such Debtor does not reject such recommendation within five (5) Business Days after receipt of such recommendation in writing, (ii) any Debtor enters into a definitive contract or agreement relating to a Competing Transaction, (iii) any Debtor or the board of directors of such Debtor publicly announces its intention to do any of the foregoing or (iv) the Bankruptcy Court enters a non-appealable order approving any of the foregoing.

3.5   Termination by Mutual Consent .  This Agreement may be terminated prior to the Closing by mutual written consent of the Company and Parent.

3.6   Termination by the Company .  This Agreement may be terminated by the Company:

(a)   at any time prior to the time the Bankruptcy Court shall have entered the Confirmation Order, if (i) the board of directors of the Company and the Bankruptcy Court authorize the Company, subject to complying with the terms of this Agreement, to enter into a definitive agreement with respect to a Superior Proposal, (ii) the board of directors of the Company has determined in good faith, after consultation with its legal and financial advisors, that the transactions contemplated by such agreement constitutes a Superior Proposal, (iii) Simmons Company, the Company and Opco are not then and have not been in breach in any material respect of any of their obligations under Section 6.2 , and (iv) the Debtors pay the Break-Up Fee plus the Break-Up Fee Expense Amount or deliver the Break-Up Fee Note in accordance with the terms of Section 3.10(c) (any purported termination pursuant to this Section 3.6(a) shall be void and of no force or effect unless the Debtors shall have made such payment or agreed to make such payment in accordance with Section 3.10(c) ); or

(b)   if any condition set forth in Section 8.2 or Section 8.3(a) shall have become incapable of fulfillment prior to the Termination Date other than as a result of a breach by any Debtors of any covenant or agreement contained in this Agreement, and such condition is not waived by the Company.

3.7   Termination by Parent .  This Agreement may be terminated at any time prior to the Closing by Parent:

(a)   if any condition set forth in Section 8.1 or Section 8.3(a) shall have become incapable of fulfillment prior to the Termination Date other than as a result of a breach by Parent or Purchaser of any covenant or agreement contained in this Agreement, and such condition is not waived by Parent; or

(b)   if any amendments that would require Purchaser Approval (under and as defined in the Plan) are made to the Plan, Plan Sponsor Order or Confirmation Order without Purchaser Approval (as defined in the Plan).

3.8   Waiver; Automatic Stay .  The failure of a party to exercise its right to terminate this Agreement under, or the extension of any time period in, any provision of this Article III at any time will not constitute a waiver of any such right.  For the avoidance of doubt, the automatic stay arising pursuant to section 362 of the Bankruptcy Code in the Bankruptcy Case shall be deemed waived or modified for purposes of providing notice under or terminating this Agreement.

3.9   Procedure Upon Termination .  In the event of termination pursuant to this Article III , written notice thereof shall forthwith be given to the other party or parties (other than in the case of termination pursuant to Section 3.4 ), and this Agreement shall terminate without further action by the parties hereto.  If this Agreement is terminated as provided herein, each party shall, and shall cause each of its Affiliates and each of its and their respective agents, consultants, advisors and Representatives that has heretofore executed a confidentiality agreement, or a consent with respect to compliance with any confidentiality agreement, in connection with the transactions contemplated herein, to return or destroy, in accordance with the terms of the Confidentiality Agreement or other applicable confidentiality agreement, all written Confidential Information (as defined in the Confidentiality Agreement) and any other written material containing or reflecting any of the Confidential Information (as defined in the Confidentiality Agreement), including any copies, extracts or other reproductions in whole or in part, mechanical or electronic, of such written material, or any computer records, voicemails, documents, memoranda, notes or other writings whatsoever prepared by such party or its Representatives based on the Confidential Information (as defined in the Confidentiality Agreement).

3.10   Effect of Termination; Break-Up Fee .

(a)   In the event of termination of this Agreement pursuant to this Article III , this Agreement shall become void and of no effect with no liability to any Person on the part of any party hereto (or of any of its Representatives or Affiliates); provided, however, and notwithstanding anything in the foregoing to the contrary, that Section 3.9 , Section 3.10 and the provisions set forth in Article IX shall survive the termination of this Agreement.

(b)   In the event that:

(A)   this Agreement shall terminate pursuant to Section 3.4(a) , Section 3.4(b) or Section 3.4(c) ; or

(B)   this Agreement shall terminate pursuant to Section 3.7(b) because of an amendment to the Plan Sponsor Order made prior to or upon entry of the Plan Sponsor Order by the Bankruptcy Court;

(c)   In the event that:

(A)   this Agreement shall terminate pursuant to Section 3.4(g) , Section 3.4(h) or Section 3.6(a) ; or

(B)   this Agreement is terminated by Parent pursuant to (i) Section 3.7(b) because of an amendment to the Plan, Plan Sponsor Order or Confirmation Order made following entry of the Plan Sponsor Order by the Bankruptcy Court, or (ii) Section 3.7(a) solely as it relates to Section 8.1 as a result of a breach by the Company or Opco of its obligations under this Agreement;

(d)   Simmons Company, the Company and Opco acknowledge that the agreements contained in this Section 3.10 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the Purchaser Entities would not enter into this Agreement; accordingly, if the Company fails to pay the amount due pursuant to, and in accordance with the terms of Section 3.10(b) or Section 3.10(c) , and either party commences a suit or files a motion to determine the obligation of the Company to pay the amount set forth in Section 3.10(b) or Section 3.10(c) or any portion thereof, the prevailing party shall be entitled to recover from the non-prevailing party all of its reasonable substantiated costs and expenses (including reasonable attorneys’ fees) solely in connection with such suit or motion, together with interest on such amount or portion thereof at the “prime rate” as published in The Wall Street Journal, Eastern Edition in effect on the date such payment was required to be made through the date of payment (calculated daily on the basis of a year of 365 days and the actual number of days elapsed, without compounding) (the “ Prime Rate ”).

4.1   Organization and Good Standing .   Schedule 4.1 sets forth the name and jurisdiction of organization of each of Simmons Company, the Company, Opco and their respective Subsidiaries.  Each of Simmons Company, the Company, Opco and their respective Subsidiaries have made available to Purchaser copies of their respective certificate of incorporation, bylaws or other organizational documents, as the case may be, as currently in effect on the date hereof.  Each of Simmons Company, the Company, Opco and their respective Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and, subject to the limitations imposed on such Debtors as a result of filing the Bankruptcy Case, has the requisite corporate or company power and authority to own, lease, operate or otherwise hold its properties and assets and to carry on its business as now conducted.  Each of Simmons Company, the Company, Opco and their respective Subsidiaries is duly qualified or authorized to do business as a foreign entity and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties or assets requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a Company Material Adverse Effect.

4.2   Authorization of Agreement .  Each Debtor has all requisite power, authority and legal capacity to execute and deliver, or authorize Opco to execute and deliver on its behalf, this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by such Debtor in connection with the consummation of the transactions contemplated by this Agreement (the “ Company Documents ”) and, subject to entry of the Confirmation Order and the Plan Sponsor Order, to perform its respective obligations hereunder and thereunder and consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the Company Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of each Debtor.  This Agreement has been, and the Company Documents will be at or prior to the Closing, duly and validly executed and delivered by, or on behalf of, each Debtor and (assuming the due authorization, execution and delivery by the other parties hereto and thereto, the entry of the Confirmation Order and, with respect to the Company’s obligations under Section 3.10 , the entry of the Plan Sponsor Order) this Agreement constitutes, and each of the Company Documents when so executed and delivered will constitute, legal, valid and binding obligations of each Debtor, enforceable against it in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

4.3   Conflicts; Consents .

(a)   The execution, delivery and performance by, or on behalf of, the Debtors of this Agreement and the Company Documents, the consummation of the transactions contemplated hereby and thereby, or compliance by the Debtors with any of the provisions hereof or thereof will not (A) conflict with, or result in any violation of, or constitute a breach or default (with or without notice or lapse of time, or both) under, or give rise to any penalty or right of termination, cancellation or acceleration under, any provision of (i) the certificate of incorporation and by-laws or comparable organizational documents of Simmons Company, the Company, Opco or any of their Subsidiaries; (ii) subject to entry of the Confirmation Order and applicable provisions of the Bankruptcy Code, any Contract or Permit to which Simmons Company, the Company, Opco or any of their Subsidiaries is a party or by which any of the properties or assets of Simmons Company, the Company, Opco or any of their Subsidiaries is bound, except where the right of termination or cancellation of the Contract arises from the bankruptcy of the Debtors or its Subsidiaries; (iii) subject to compliance with the applicable requirements of the HSR Act and other Antitrust Laws and entry of the Confirmation Order and applicable provisions of the Bankruptcy Code, any Order of any Governmental Body or Law applicable to the Company, Opco or any of their Subsidiaries or any of their respective properties or assets as of the date hereof, other than, in the case of clauses (ii) and (iii), such conflicts, violations, defaults, terminations or cancellations that would not have a Company Material Adverse Effect or (B) result in the creation or imposition of any Lien other than Permitted Exceptions on any of the assets or properties of Simmons Company, the Company, Opco or any of their Subsidiaries.

(b)   No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of Simmons Company, the Company, Opco or any of their Subsidiaries in connection with the execution, delivery and performance of this Agreement or the Company Documents, the compliance by the Debtors with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby or thereby or the taking by the Debtors of any other action contemplated hereby or thereby, except for (i) compliance with the applicable requirements of the HSR Act and other Antitrust Laws, (ii) the entry of the Confirmation Order, (iii) the entry of the Plan Sponsor Order, and (iv) such other consents, waivers, approvals, Orders, Permits, authorizations, declarations, filings and notifications, the failure of which to obtain or make would not have a Company Material Adverse Effect.

4.4   Financial Statements; Undisclosed Liabilities .

(a)   The Company has delivered to the Purchaser Entities copies of (i) the audited consolidated balance sheets of Simmons Company as at December 30, 2006, December 29, 2007 and December 27, 2008 the related audited consolidated statements of operations and of cash flows for the fiscal years then ended, together with all related notes and schedules thereto, accompanied by the reports thereon of Simmons Company’s accountants and (ii) the unaudited condensed consolidated balance sheet of Simmons Company as at June 27, 2009 and the related consolidated statement of operations and cash flows for the six month period then ended (such audited and unaudited statements, including the related notes and schedules thereto, are referred to herein as the “ Financial Statements ”).  Each of the Financial Statements (X) was prepared in all material respects in accordance with the books of account and other financial records of Simmons Company, (Y) except as disclosed in the notes and schedules thereto, has been prepared in accordance with GAAP consistently applied without modification of the accounting principles used in the preparation thereof throughout the periods presented and (Z) presents fairly in all material respects the consolidated financial condition, results of operations and cash flows of Simmons Company, as applicable, as at the dates and for the periods indicated therein; provided that the unaudited Financial Statements are subject to normal year-end audit adjustments which are not, in the aggregate, material in amount or effect as of the date hereof.

(b)   There are no Liabilities of Simmons Company, the Company, Opco or any of their Subsidiaries of any kind required by GAAP to be disclosed on a balance sheet, other than (i) Liabilities that are fully and adequately reflected or reserved against in the Financial Statements, (ii) Liabilities incurred in the Ordinary Course of Business subsequent to December 27, 2008, (iii) Liabilities resulting from obligations pursuant to Material Contracts entered into in the Ordinary Course of Business provided that Simmons Company, the Company, Opco or its Subsidiaries, as applicable, are not in default thereunder, (iv) Liabilities disclosed on Schedule 4.4(b) , and (v) other undisclosed Liabilities that would not have a Company Material Adverse Effect.

4.5   Capitalization .   Schedule 4.5 sets forth the number of authorized and outstanding shares of capital stock or comparable equity interest of each of Simmons Company, the Company, Opco and their Subsidiaries, the names of the record holders thereof and the amount of capital stock or comparable equity interest held by such holder.  All outstanding shares of capital stock or other equity interest of each of Simmons Company, the Company, Opco and their Subsidiaries have been duly authorized and validly issued and are fully paid and non assessable, were issued in compliance with all applicable federal and state securities laws and any preemptive rights or rights of first refusal of any Person, and are not listed on any stock exchange or regulated market. The capital stock or other equity interest of each of the Company’s Subsidiaries is owned by the Company or by a direct or indirect wholly-owned Subsidiary of the Company, free and clear of any Lien, except for Permitted Exceptions.  There are no, and Simmons Company, the Company, Opco and their Subsidiaries are not bound by or subject to any, outstanding (i) securities convertible into or exchangeable for shares of capital stock or voting securities of any of Simmons Company, the Company, Opco and their Subsidiaries, or (ii) options, warrants, put, call, exchange or other rights (including pre-emptive rights or rights of first offer) agreements, commitments, arrangements or understandings of any kind pursuant to which Simmons Company, the Company, Opco and their Subsidiaries, contingently or otherwise, are or may become obligated to offer, issue, sell purchase, return or redeem, or cause to be offered, issued, sold, purchased, returned or redeemed, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Simmons Company, the Company, Opco and their Subsidiaries (the items in the preceding clauses (i) and (ii) together with shares of capital stock or voting securities of Simmons Company, the Company, Opco and their Subsidiaries, being referred to collectively as the “ Debtor Securities ”).  There are no voting trusts, proxies or any other agreements or understandings with respect to the voting of any Debtor Securities or that affects or relates to the voting or giving of written consents with respect to any Debtor Securities.  There is no agreement or restriction (such as a right of first refusal, right of first offer or proxy) with respect to the sale of any Debtor Securities (whether outstanding or issuable upon conversion or exercise of outstanding securities).  There are no agreements, commitments, arrangements, understandings or other obligations to declare, make or pay any dividends or distributions, whether current or accumulated, or due or payable, on any Debtor Securities.

4.6   Title .  Other than the real property subject to Real Property Leases, Intellectual Property, and personal property subject to personal property leases, each of Simmons Company, the Company, Opco and their respective Subsidiaries owns or has a valid right to use all of the material assets used or held for use by it in the conduct of the Business, free and clear of all Liens, other than Permitted Exceptions.

4.7   Taxes .

(a)   For all taxable years ending on or after December 31, 2001, Simmons Company, the Company, Opco and their respective Subsidiaries have timely filed all federal and all material state, local or foreign Tax Returns required to be filed with the appropriate Tax Authorities in all jurisdictions in which such Tax Returns are required to be filed (taking into account any extension of time to file granted or to be obtained on behalf of Debtors or their Subsidiaries) and all such Tax Returns are correct and complete in all material respects. All Taxes shown to be payable on such Tax Returns have been paid.

(b)   No agreements, waivers or other arrangements exist providing for an extension of time with respect to payment by, or assessment against, any of Simmons Company, the Company, Opco or their respective Subsidiaries in respect of any Taxes.  None of Simmons Company, the Company, Opco or any of their respective Subsidiaries is a party to or bound by any Tax sharing or allocation agreement or has any current or potential contractual obligation to indemnify any Person other than Simmons Company, the Company or any of its Subsidiaries with respect to Taxes.

(c)   (i) None of the Tax Returns referred to in Section 4.7(a) is currently being examined by the Internal Revenue Service or the appropriate state, local or foreign taxing authority; and (ii) to the Knowledge of the Company, there is no jurisdiction where any of Simmons Company, the Company, Opco or any of their respective Subsidiaries might be required to file Tax Returns where such Tax Returns have not been filed.

(d)   None of Simmons Company, the Company, Opco and their respective Subsidiaries will be required, as a result of (i) a change in accounting method for a Tax period beginning on or before the Closing, to include any adjustment under Section 481(c) of the Code (or any similar provision of state, local or foreign law) in taxable income for any Tax period beginning on or after the Closing Date, or (ii) any “closing agreement” as described in Section 7121 of the Code (or any similar provision of state, local or foreign Tax law), to include any item of income in or exclude any item of deduction from any Tax period beginning on or after the Closing.

(e)   From and after the taxable year ending December 31, 2001, none of Simmons Company, the Company, Opco and their respective Subsidiaries has ever been a member of an affiliated, combined, consolidated or unitary Tax group for purposes of filing any Tax Return (other than the group that they are currently members of).

(f)   From and after the taxable year ending December 31, 2001, no closing agreements, private letter rulings, technical advice memoranda or similar agreement or rulings have been entered into or issued by any taxing authority with respect to any of Simmons Company, the Company, Opco and their respective Subsidiaries.

(g)   For all periods for which Treasury Regulations Section 1.6011-4 has been effective, none of Simmons Company, the Company, Opco and their respective Subsidiaries has engaged in any transaction that is the same as, or substantially similar to, a transaction which is a “reportable transaction” for purposes of Treasury Regulations Section 1.6011-4(b) (including any transaction which the Internal Revenue Service has determined to be a “listed transaction” for purposes of Treasury Regulation Section 1.6011-4(b)(2)) or any comparable provisions of state or local Law.  From and after the taxable year ending December 31, 2001, none of Simmons Company, the Company, Opco and their respective Subsidiaries has (i) engaged in a transaction of which it made disclosure to any taxing authority to avoid penalties under Section 6662(d) of the Code or any comparable provision of state, foreign or local law or (ii) participated in any “tax amnesty” or similar program offered by any taxing authority to avoid the assessment of penalties or other additions to Tax.

(h)   None of Simmons Company, the Company, Opco and their respective Subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for Tax-free treatment under Section 355(a) of the Code: (i) at any time during the two-year period prior to the date hereof, (ii) at any time during the period commencing on the date hereof and ending on the Closing Date or (iii) which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with and including the transactions contemplated by this Agreement.

(i)   Simmons Company, the Company, Opco and their respective Subsidiaries are and have always been properly characterized as a corporation for U.S. federal income tax purposes.

(j)   From and after the taxable year ending December 31, 2001, each of Simmons Company, the Company, Opco and their respective Subsidiaries has duly and timely withheld all material amounts of Taxes required by Law to be withheld by it (including Taxes required to be withheld by it in respect of any amount paid or credited or deemed to be paid or credited by it to or for the account of any person, including any Employees, officers or directors and any non-resident person) and has duly and timely remitted to the appropriate Tax Authority such Taxes required by Law to be remitted by it.

(k)   Simmons Company’s Financial Statements reflect an appropriate reserve, in accordance with GAAP for all material Taxes payable by Simmons Company, the Company and their Subsidiaries that are not yet due and payable whether or not assessed and whether or not shown as being due on any Return and that relate to periods ending on or prior to the date of such financial statements, and Simmons Company, the Company and their Subsidiaries have made adequate provisions in accordance with GAAP in their books and records for any Taxes accruing in respect of any period which has ended subsequent to the period covered by such financial statements.

(l)   From and after the taxable year ending December 31, 2001, none of Simmons Company, the Company, Opco and their respective Subsidiaries has acquired property from a non-arm’s length person for consideration, the value of which is less than the fair market value of the property acquired in circumstances which could subject it to a liability for Taxes.

4.8   Real Property .

(a)   Schedule 4.8(a) sets forth a complete list of the street address of each parcel of owned real property owned in fee by Simmons Company, the Company, Opco or their Subsidiaries (individually, an “ Owned Property ” and collectively, the “ Owned Properties ) and the current record owner of each such Owned Property.  With respect to each such Owned Property (a) the identified record owner has good and marketable fee simple title to the parcel, free and clear of all Liens, other than Permitted Exceptions; (b) there are no leases, subleases or licenses, written or oral, granting to any party or parties, other than to Simmons Company, the Company, Opco or their Subsidiaries, any material right of use or occupancy of such parcel or any portion thereto (except for matters of public record or matters which are disclosed in a survey); and (c) no Person, other than Simmons Company, the Company, Opco or their Subsidiaries, has any agreement to purchase, right of first refusal, option to purchase or any other right to acquire from Simmons Company, the Company, Opco or their Subsidiaries all or any part of the Owned Properties.  Correct and complete copies of each vesting deed, title policy, land registrar and/or title commitment, easement, survey and other instrument affecting title to the Owned Properties that are currently in Simmons Company’s, the Company’s, Opco’s or any of their respective Subsidiaries’ possession been made available to the Purchaser Entities.  None of Simmons Company, the Company, Opco and their Subsidiaries has any options to acquire any fee interest or leasehold interest in any real property other than with respect to the Owned Properties or the Real Property Leases.  To the Knowledge of the Company, there are no existing public improvements which may reasonably be expected to result in any material special assessment and no pending or, to the Knowledge of the Company, threatened assessments that could materially adversely affect the ownership, operation, use or enjoyment of the Owned Properties.  To the Knowledge of the Company, each of the Owned Properties has been granted such entitlements, whether by applicable zoning, variance or otherwise, to be used as it is currently used, and there is no pending or, to the Knowledge of the Company, threatened change in any such entitlement.  There are no pending or, to the Knowledge of the Company, threatened claims relating to condemnation, eminent domain or similar proceedings affecting the Owned Properties in any material respect.

(b)   Schedule 4.8(b) sets forth a complete list of all real property leased or subleased by Simmons Company, the Company, Opco or their Subsidiaries (individually, a “ Real Property Lease ” and collectively, the “ Real Property Leases ”).  All Real Property Leases are held by Simmons Company, the Company, Opco or their Subsidiaries under valid leasehold interests.  The Company has made available to the Purchaser Entities a correct and complete copy (with all amendments thereto) of the leases and subleases for the Real Property Leases.  To the Knowledge of the Company, each lease and sublease (as amended) for the Real Property Leases is in full force and effect in all material respects, and none of Simmons Company, the Company, Opco or their respective Subsidiaries has received written notice of a current default under any such lease or sublease.  None of the parties to any such lease or sublease has provided as of the date hereof written notification to Simmons Company, the Company, Opco or any of their respective Subsidiaries of an intention not to renew any such lease or sublease.  To the Knowledge of the Company, each of the properties subject to Real Property Leases has been granted such entitlements, as necessary, whether by applicable zoning, variance or otherwise, to be used as it is currently used, and there is no pending or, to the Knowledge of the Company, threatened change in any such entitlement, if any.

4.9   Insurance .  The Company has made available to the Purchaser Entities all policies of fire, liability, workers’ compensation, property, casualty and other forms of insurance currently in force for the benefit of or relating to the assets, properties, business, operations, employees, officers or directors of Simmons Company, the Company, Opco and their respective Subsidiaries.  All such policies are valid and in full force and effect, all premiums with respect thereto covering all periods up to the date of this Agreement have been timely paid and Simmons Company, the Company, Opco and their respective Subsidiaries are otherwise in compliance with their obligations under such policies in all material respects, and, except for notices of cancellation received by Simmons Company, the Company, Opco or their respective Subsidiaries in the Ordinary Course of Business prior to the renewal date of such policies, no written notice of cancellation, termination or non-renewal has been received by Simmons Company, the Company, Opco or their respective Subsidiaries with respect to any such policy, nor has Simmons Company, the Company, Opco and or their respective Subsidiaries been denied insurance coverage.  No policy limits under such policies have been exhausted or materially reduced.  No insurance policy with respect to Simmons Company, the Company, Opco or their respective Subsidiaries is maintained through a qualified self-insurance, other than the deductible portion of any insurance policy.  All material claims, if any, made against Simmons Company, the Company, Opco or their respective Subsidiaries that are covered by insurance have been disclosed to and have not been rejected or reserved as to any rights by the appropriate insurer.

4.10   Intellectual Property .

(a)   Schedule 4.10(a) sets forth a true and complete list of all (i) Intellectual Property that is registered by Simmons Company, the Company, Opco or any of their respective Subsidiaries or for which an application for registration by Simmons Company, the Company, Opco or any of their respective Subsidiaries is pending, and (ii) material Trademarks that are not subject to a registration or pending application for registration that Simmons Company, the Company, Opco or any of their respective Subsidiaries owns or for which it claims ownership.

(b)   Parent Company does not own or license any Company Intellectual Property.  The Company, Opco and/or their respective Subsidiaries exclusively own or have licenses to use, free and clear of all Liens except Permitted Exceptions, all Company Intellectual Property conveyed to Purchaser in connection with this Agreement.  To the Knowledge of the Company, (i) all Company Intellectual Property owned or exclusively licensed by the Company, Opco or any of their respective Subsidiaries is valid and enforceable and (ii) subject to Section 7.2(b)(I) of this Agreement, all Company Intellectual Property that is registered by the Company, Opco or any of their respective Subsidiaries is subsisting.  No claims are pending or, to the Knowledge of the Company, threatened, against Simmons Company, the Company, Opco and their respective Subsidiaries based on any claim or allegation that the operation of the Business infringes, misappropriates, dilutes, or otherwise violates any Intellectual Property right of any third party, nor, to the Knowledge of the Company, is there a basis for such a claim.

(c)   To the Knowledge of the Company, no Person is infringing, misappropriating, diluting or otherwise violating any Company Intellectual Property that is exclusively licensed or owned by the Company, Opco or their respective Subsidiaries’ in any material respect.

(d)   The material Company Intellectual Property is not the subject of any challenge received by Simmons Company, the Company, Opco and their respective Subsidiaries in writing.

(e)   Each of Simmons Company, the Company, Opco and their respective Subsidiaries has taken reasonable measures to protect the confidentiality of all trade secrets and other confidential business information that are owned, used or held by any of them, respectively, and to the Knowledge of the Company, such trade secrets and other material confidential business information have not been used, disclosed to or discovered by any Person except pursuant to non-disclosure agreements which, to the Knowledge of the Company, have not been breached.  To the Knowledge of the Company, none of Simmons Company, the Company, Opco or their respective Subsidiaries has breached a non-disclosure agreement with respect to, any trade secrets or other confidential business information that are owned, used or held by any other Person.

(f)   Each of Simmons Company, the Company, Opco and their respective Subsidiaries has complied in all material respects with (i) all applicable Laws regarding data protection and the privacy and security of personal information, and (ii) their respective posted privacy policies.

(g)   Notwithstanding anything in this Agreement to the contrary, this Section 4.10 contains the sole and exclusive representations and warranties in this Agreement relating to Intellectual Property infringement matters.

4.11   Material Contracts .

(a)   Schedule 4.11 sets forth all Contracts (except purchase orders executed in the Ordinary Course of Business and except for leases and/or subleases for real property) to which any of Simmons Company, the Company, Opco and their respective Subsidiaries is a party, or is otherwise bound, or to which any of their respective assets are bound, of the type described below (collectively, the “ Material Contracts ”):

(A)   (a) any option or purchase Contract which involves commitments to purchase by Simmons Company, the Company, Opco or their respective Subsidiaries in excess of $2,000,000 annually, and (b) any agreement for the lease of personal property to or from any Person providing for payments in excess of $1,000,000 annually, in each case that cannot be terminated on not more than 60 days’ notice without payment by Simmons Company, the Company, Opco or their respective Subsidiaries of any penalty;

(B)   any agreement concerning a partnership or joint venture;

(C)   any agreement entered into during the five (5) years prior to the date hereof relating to the acquisition or disposition of any business or assets outside the Ordinary Course of Business (whether by merger, sale/purchase of stock, sale/purchase of assets or otherwise), in each case for consideration in excess of $5,000,000;

(D)   Contracts (other than inter-company Contracts between any of the Company, Opco or their respective wholly-owned Subsidiaries) relating to incurrence of Indebtedness or the making of any loan or advance, in each case involving amounts in excess of $500,000;

(E)   any agreement that restricts the ability of Simmons Company, the Company, Opco or their respective Subsidiaries to (i) compete in any line of the Business anywhere in the world, (ii) except further as part of any temporary hire agreement entered into in the Ordinary Course of Business, solicit or retain any customer of the Business to do business, or (iii) except further as part of any temporary hire agreement, consulting agreement or IT services agreement entered into in the Ordinary Course of Business, solicit or hire any person in the Business to become an employee;

(F)   except for agreements entered into in the Ordinary Course of Business, all agreements involving Simmons Company, the Company, Opco or their respective Subsidiaries and a Governmental Body;

(G)   any agreement with any labor union or association representing any employees of Simmons Company, the Company, Opco or their respective Subsidiaries or any collective bargaining agreements;

(H)   any license, royalty or other agreement (other than engagement letters with consultants or intra-company licenses, royalties or agreements between any of the Company, Opco or their respective wholly-owned Subsidiaries) granting rights to Simmons Company, the Company, Opco or any of their respective Subsidiaries to the Intellectual Property of any other Person which involves Intellectual Property that is material to the conduct of the Business;

(I)   any stockholders agreement, registration rights agreement, voting agreement or other similar agreement to which Simmons Company, the Company, Opco or any of their respective Subsidiaries is subject;

(J)   any agreement creating an indemnification obligation of Simmons Company, the Company, Opco or any of their respective Subsidiaries in an amount in excess of $500,000, other than agreements entered into in the Ordinary Course of Business and other than engagement or advisor agreements entered into in connection with the restructuring of the Debtors;

(K)   any agreement whereby any of Simmons Company, the Company, Opco or th